Monday, September 26, 2011

Post Paradise Stress Disorder?

It's official, my journey to paradise has now ended. I arrived in Montreal on Sunday afternoon but my head is still in Greece. I think I'm suffering from post paradise stress disorder. Went for an amazing workout this morning to clear my head, and here are some random thoughts on everything I'm mulling over:

Why did I leave paradise?: I had an awesome vacation and really didn't want to leave. I can easily live in Greece. I love the weather, the food, the beach, the sea, the sun, the beautiful women from all over the world, but most of all, love being close to my family. I even love the hustle and bustle of Athens, including the dust, pollution, traffic, and chaos. Athens is alive whereas Montreal is dead. I feel so healthy there. Montreal is my home, love it here too, but the weather here just isn't for me and it's especially hard on people dealing with a chronic disease like multiple sclerosis. Everything seems so heavy here. The minute I walked off the plane, walking became harder. It's as if my body rejects this weather and is telling me to head back to Greece and trade from there. My dream is to gather some buddies of mine with experience in managing money, get seed money, and start a global macro fund in Athens and trade everything under the sun - stocks, bonds, commodities, and currencies. The hours are perfect. We can wake up at our leisure, enjoy the beach and sun, eat like kings, start trading in the late afternoon, and after markets close, go out for a late dinner and drinks and enjoy some eye candy. Screw London, Athens should be an international hub for hedge funds and trading (don't know what happened to those guys at Vega Asset Management, but they were so smart to operate out of Madrid, another one of my favorite cities in the world).

How bad is the Greek crisis?: A friend of mine asked me "how bad is it?". I told him if you go there you wouldn't notice a drastic change in the way Greeks live but it's terrible, they are going to have to default, which means a substantial haircut for their lenders, and once again, the burden will fall on the poor, working poor and pensioners. Stores are closing, unemployment is soaring, no thanks to austerity, but Greeks are fed up with the crisis and being the whipping boy for all the world's economic ills. Those that have money are still going out to clubs and restaurants, and even those that don't try to enjoy their life. What choice do they have?

The real Greek disease: I had dinner at my cousin's house my last night in Athens. She invited friends of hers and her husband which included an editor of a foreign paper covering Greece, and self-employed business people. My cousin's husband who deals in real estate told me flat out: "We are tired of paying taxes for an over-bloated public sector. There are almost 1 million public sector workers in Greece for a population of roughly 12 million. The comparable figures in Germany and France, with populations of roughly 80 and 60 million, are 800,000 and 600,000 public sector employees respectively, or 1% of the population. Each successive government in Greece kept buying votes by hiring in the public sector, increasing wages and stupid incentives like "showing up to work on time," and the Ponzi scheme has now ended. The private sector is fed up paying higher taxes to keep the Greek public sector intact. We want drastic cuts in public sector jobs, incentives, wages and pensions. Period." Those sentiments were shared by all at that dinner and while I agree, I reminded them that the economy is already in a deep recession and drastic cuts in the public sector will ensure a long-term depression. There also needs to be cuts in taxes, focus on growth and investments, and a serious effort to tackle tax evasion once and for all.

Looking beyond the Greek debt crisis: I posted several articles on Twitter this morning (follow me by searching @PensionPulse). One of them was an op-ed in Ekathimerini by Thanos Skouras, professor emeritus at Athens University of Economics and Business, and Alfred Steinherr, honorary chief economist at the European Investment Bank, entitled Looking beyond the debt horizon in Greece. The authors rightly note that policies are needed to stimulate productivity growth in Greece where unit labor costs have been rising faster than any other country in Europe and that "getting out of the euro does not offer an immediate easy solution or longer-term gain." But the authors also warn that "if personal political survival counts for most politicians more than the economy’s survival, as regrettably seems to be the case so far, exit from the eurozone will be the inevitable outcome of a default."

Barriers to stave off Greek default?: Bloomberg reports that German Chancellor Angela Merkel said euro-region leaders must erect a firewall around Greece to avert a cascade of market attacks on other European states that would risk breaking up the currency area. She rejected Greece leaving the euro area, saying that “we can’t force it, but I don’t believe in that in any case” because it would send a signal to financial markets that attacks on euro-area sovereigns can succeed. “Maybe Greece leaves, the next country leaves and then the next country after that,” she said. “They would speculate against all the countries.” A small group of euro countries would be left at the end, deprived of the euro’s advantage as the currency appreciates, she said.Glad to see she's finally realizing the severity of the situation but we still need to implement what Soros and others are calling for, namely, a euro bond market backed up by a strong European treasury.

Some sun in the Greek economy?: Ekathimerini reports that German firms checking out investments in Greece and are reportedly interested in three main areas: energy, airports and minerals. It's about time! I also think American, Chinese and Canadian firms should be looking at investing in Greece now. I see incredible potential in Greece in agriculture, solar, shipping, tourism, airports, ports, bridges, infrastructure, minerals, information technology, biotech, and banking. Tread carefully, however, as Greeks are sharks, but if you have the right people in place in these projects, you can make a killing.

Think I will end it on that cheerful note. Don't know what surprises await us this week in the markets but I am well rested and will continue to blog, tweet and trade. I'm also looking for work, be it full-time or contract, and have reached out to some pension funds and hedge funds. My first choice would be to work with good, smart, and ethical people who know how to manage money properly.

While on vacation, I re-read the New Yorker article on Ray Dalio Mastering the Machine. I'm far from perfect but all I know is that I'm not interested in working with insecure and arrogant weasels who are more concerned about managing their career than managing money. Been there, done that, and it's time to put myself first and build my future by surrounding myself with the right type of people both at work and in my personal life.

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I am an independent senior economist and pension and investment analyst with years of experience working on the buy and sell-side. I have researched and invested in traditional and alternative asset classes at two of the largest public pension funds in Canada, the Caisse de dépôt et placement du Québec (Caisse) and the Public Sector Pension Investment Board (PSP Investments). I've also consulted the Treasury Board Secretariat of Canada on the governance of the Federal Public Service Pension Plan (2007) and been invited to speak at the Standing Committee on Finance (2009) and the Senate Standing Committee on Banking, Commerce and Trade (2010) to discuss Canada's pension system. You can follow my blog posts on your Bloomberg terminal and track me on Twitter (@PensionPulse) where I post many links to pension and investment articles as well as my market thoughts and other articles of interest.

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